In this article we will talk about the loan estimate form or sometimes called the LE. That is a term you hear a lot about in the mortgage industry. So what is a loan estimate form? That’s a very good question, it can certainly be confusing especially if you’re not in the mortgage industry. So that being said in the video above Jeff Newton from National VA loans goes over the loan estimate form and explains everything.
History of the Loan Estimate Form
Essentially the loan estimate is the first document you’ll see in your disclosure package. It details your settlement charges including our fees origination discount points title fees etc but first lets talk about the history of the loan estimate. For those of you who got mortgages in the past you might have heard the term Good Faith Estimate or a GFE. Many of us in the mortgage industry still often refer back to the GSE when asking for the LE. The Good Faith Estimate and the Truth in Lending which detailed the the APR and the total of payments over 30 years etc. The government decided to combine these two forms in 2015. These two forms are now the Loan Estimate form. The combination of these two forms is an effort to make things easier for home buyers to understand. The LE includes all the terms of the loan such as the interest rate and the projected monthly payment, including interest, principal, mortgage insurance and taxes.
This new Loan Estimate form also shows all the fees required to process and approve the loan as well as estimated closing costs. The Loan Estimate and the Closing Disclosure are two new forms that combine the traditional Good Faith Estimate, Truth in Lending disclosure and HUD-1 Settlement Statement that are required by federal law. These old forms are being combined and streamlined to provide consumers more transparency regarding what they will pay for a mortgage loan and related closing costs. The loan estimate is designed to make it easier for consumers to compare and shop around for the BEST mortgage for their situation. The Loan Estimate is provided to a buyer within 3 business days of applying for a mortgage loan. Page 1 of the form includes information about you, the price of the home you’re looking to buy, and the loan term and type – for example, a 30-year fixed-rate conventional loan. The terms of the loan include the amount you are borrowing, the interest rate, the monthly principal and interest payment, and whether there’s any prepayment penalty or balloon payment. The form then shows the estimated costs for the rest of the monthly payment, including mortgage insurance, property taxes and homeowner’s insurance.
The last portion shows the estimated closing costs and approximate amount of money you’ll have to bring to closing, which includes the down payment. Page 2 of the Loan Estimate breaks down the closing costs, showing what fees you’ll pay the lender to process, underwrite and fund the loan. The next 2 sections detail closing cost items you CAN and CANNOT shop for. There are certain fees for services that the lender requires, and those costs and providers are set. Other items such as the pest inspection fee, the survey fee, and various title and settlement costs are required to finalize the loan, but the borrower is permitted to choose his own service providers.
If you are a veteran that is purchasing a new home or refinancing an existing home loan the video above is a short tutorial and explanation of the loan estimate form. That being said the information in this video is provided for general educational purposes only and should not be construed or relied upon as legal advice. This information is provided “as is” without any representations or warranties, express or implied, including but not limited to any representation that the information is complete, true, accurate, up-to-date or non-misleading. If you have specific questions about any information provided in this video, please contact us here at National VA Loans. It is our mission to simply the mortgage process for veterans. If you have a question or would like to learn more about your VA home loan benefits give us a call today at 855-956-4040.